NEW YORK, July 29 (Reuters) - U.S. stocks on Monday stepped back from last week's record highs as investors took a breather ahead of an expected interest rate cut by the Federal Reserve and looked for signs of progress from U.S.-China trade negotiations underway in Shanghai.

Amazon.com Inc and Facebook Inc weighed heaviest on the S&P 500 and the Nasdaq, which both closed lower. The blue-chip Dow closed in the black, led by 3M Co, Johnson & Johnson and Apple Inc.

Market participants girded themselves for an eventful week, with the FOMC meeting, U.S.-China trade talks and nearly a third of the companies in the S&P 500 due to post second-quarter results.

The Fed, watchful of languid inflation and signs of economic softness arising from tariff disputes, is expected to lower interest rates for the first time in a decade at the conclusion of its two-day monetary policy meeting starting on Tuesday.

"(The Fed is) looking ahead and they know there's increased downside risks around trade and supply lines," said Charlie Ripley, Senior Investment strategist for Allianz Investment Management in Minneapolis. "What they want to do is sustain the economic expansion, and one way to do that is an insurance rate cut in the event the economy slows down more than expected."

U.S. negotiators are meeting their Chinese counterparts in Shanghai this week to try to find a path toward resolving the long-running, market-rattling trade dispute between the world's two largest economies.

Trade uncertainty has "provided a back drop that's made it difficult for business managers," said Ripley, adding that the talks are "better than complete silence."

The Dow Jones Industrial Average rose 28.9 points, or 0.11%, to 27,221.35, the S&P 500 lost 4.89 points, or 0.16%, to 3,020.97 and the Nasdaq Composite dropped 36.88 points, or 0.44%, to 8,293.33.

Seven of the 11 major sectors in the S&P 500 closed in the red, with financials and consumer discretionary seeing largest percentage losses.

Nearly half of all S&P 500 companies have now posted second-quarter earnings, 76.1% of which have beaten bottom line analyst estimates, according to Refinitiv data.

Mylan NV's shares jumped 12.6% after the generic drugmaker confirmed reports that it was combining with Pfizer Inc's Upjohn unit that sells its off-patent branded medicines, a move that brings blockbuster treatments Viagra, EpiPen and Lipitor under one umbrella.

Pfizer shares slid 3.8% following news of the deal, and after the company lowered its full-year profit and revenue forecasts in an earlier-than-expected release of its quarterly results.

Advancing issues outnumbered declining ones on the NYSE by a 1.02-to-1 ratio; on Nasdaq, a 1.69-to-1 ratio favored decliners.

The S&P 500 posted 36 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 71 new highs and 106 new lows.

Volume on U.S. exchanges was 5.98 billion shares, compared to the 6.1 billion average over the last 20 trading days. (Reporting by Stephen Culp; additional reporting by Evan Sully Editing by Sonya Hepinstall)